Last time we discussed some of the terminology associated with trusts. Now let’s look at how revocable trusts differ from irrevocable trusts and the benefits of having a trust.
Revocable versus irrevocable trusts
A revocable trust is a trust that can be altered by the grantor during his or her lifetime. An irrevocable trust, on the other hand, is a trust that cannot be changed by the grantor (except under extraordinary circumstances). In the case of irrevocable trusts, the grantor typically foregoes total control of the property and must obey all trust rules and guidelines. Furthermore, a trust can be revocable during the grantor’s lifetime and then become irrevocable upon the grantor’s death.
When most people use the word “trust” in the context of estate planning, a revocable living trust is the one they have in mind.
A revocable living trust allows you to maintain complete control over your assets while you are alive and after you have passed away. You don’t have to transfer your assets to the trust all at once, you can do so over time and even add to the trust as you acquire new assets.
Other benefits of a revocable living trust include:
- Avoiding probate. The probate process is time-consuming, needlessly expensive and exposes your assets and estate to public scrutiny
- It can be changed over time, to compensate for changes in your financial and family situation
- Basic wills can lead to disagreements among family members. A revocable living trust can help eliminate challenges to the will and ensure beneficiaries receive what you have intended for them
- It allows for ongoing financial management. As your wealth accumulates, so too will assets in the trust
One of the questions frequently asked by clients is whether or not they need a trust. The answer depends on the client’s unique needs and goals. Would you benefit from a trust? We’d be happy to discuss the matter with you at your earliest convenience.